Macroeconomic model

“In contrast to Smith’s incomplete modeling, his follower, David Ricardo, provides a coherent setting— basically, the first macroeconomic model—that can be tested, modified, and applied. Although Ricardo is surely narrower and less imaginative and insightful than Smith, he is also a lot better organized. That is why Ricardo’s analysis of macroeconomics—for example, of the implications of public debt—is more coherent and useful than Smith’s.”

“Policy models, aimed at analyzing actual macroeconomic policy issues. Models in this class should fit the main characteristics of the data, including dynamics, and allow for policy analysis and counterfactuals.”

“The different classes of models have a lot to learn from each other, but the goal of full integration has proven counterproductive. No model can be all things to all people.”